Car prices could jump $6,000 as Trump’s 25% import tariff kicks in

In a nutshell: President Donald Trump recently announced an additional 25 percent tariff on imported vehicles and parts, raising concerns about its potential impact on the US automotive sector. While supporters argue that the policy will spur growth, attract investment, and create jobs domestically, critics warn that it will lead to significantly higher prices for shoppers.

The new tariff on imported cars will take effect on April 2, while the import duty on car parts will go into effect on May 3. The components subject to the new policy include engines and engine parts, transmissions and powertrain components, and electrical systems.

The tariff will be applied under the USMCA trade agreement, which was ratified during the first Trump administration. Under the plan, imported vehicles will be taxed only on their non-US content. For example, a car with 20 percent US-made components under USMCA will face a 25 percent tariff on the remaining 80 percent of its price.

According to Commerce Department data, Mexico is the largest automobile exporter to the US, followed by Japan, South Korea, Canada, and Germany. The biggest exporters of components include Mexico, China, Japan, and South Korea. Unsurprisingly, most foreign automakers and auto parts manufacturers have criticized the new tariffs, arguing that they will negatively impact both manufacturers and consumers.

The United Auto Workers union, however, praised the proposed tariffs, claiming they could create more jobs in the US. In a statement, the organization described the move as a victory for auto workers and expressed hope that it would be part of a broader “Made in America renaissance.” The union added that it believes the tariffs will encourage US automakers such as GM, Ford, and Stellantis to bring much of their production back to the U.S. after decades of offshoring.

Not everyone is convinced, though. According to some industry analysts, the new tariffs could increase the price of an average new car or truck by at least $6,000, as nearly half of all vehicles sold in the US. are imported. They further argue that the policy is a blatant violation of the USMCA, the trade deal Trump himself signed during his first term.